The Week In Review: Pay the bill and check out of this hotel chain

The hotel group M&C this week pocketed about £19m from the sale of a non-core Australian hotel-and-shopping complex.

MILLENNIUM & COPTHORNE

The hotel group M&C this week pocketed about £19m from the sale of a non-core Australian hotel-and-shopping complex. But with a rival hotel group announcing the sale of billions of pounds of assets, should M&C be gearing up for a more substantial asset sale, or are its assets, well, its best asset?

The first half of 2003 was terrible for the hotel sector. The war in Iraq and the outbreak of Sars left hotel rooms empty. But M&C announced in August that it was back in the black and revenues were improving. The Hilton Group, however, was more cautious, so questions still remain as to how much further the sector will rebound.

Intercontinental Hotels has decided not to own expensive hotel assets, believing it will make more money from contracts to manage hotels and from its brands. It is selling nearly £2bn worth of hotels, returning £1bn to shareholders. This has been well received in the City. M&C is undergoing a strategic review, but this is unlikely to result in a major asset sale; it is sticking instead to selected disposals. It will remain, then, a property play, and does trade well below its net assets of more than 500p a share. On this discount it looks cheap, but it may not be creating much value for shareholders. Check-in elsewhere.

INVENTIVE LEISURE

The owner of the Revolution vodka-bar chain has been one of the operators drowning their trading sorrows by offering cheap drinks to lure in punters. It has, however, sobered up its business and this week said sales had turned positive thanks to new vodka flavours and a new food menu. But its expansion plans are conservative and the high street is still a hostile place for Inventive and others, with few growth opportunities and the looming possibility of a smoking ban. Like the Tabasco-flavoured vodka, avoid.

ALLERGY THERAPEUTICS

This group, which began trading on the Alternative Investment Market this week, hopes to take on the billion-dollar business of common allergies. Most treatments only suppress the symptoms of the allergy, rather than treat the underlying cause, so Allergy Therapeutics has designed an allergy vaccine. It already sells them to 80,000 people in Europe. But in order to be fully registered in the US and the UK and promote its products more widely, it needs to put them through further clinical trials. It could be on the US market in 2007/8 and has long-term growth prospects that are not to be sneezed at.

MARCHPOLE HOLDINGS

The clothing designer that operates the licence for the Yves Saint-Laurent (YSL) menswear brand has a history more chequered than the lining of some of its jackets. It floated in 1997 but missed orders and margins collapsed. It now designs for Oswald Boateng, the French label Jean Charles de Castelbajac, and Emanuel Ungaro, as well as YSL. Sales are strong and the group this week said its order book for the summer collections was 15 per cent ahead of last year. Sales growth and profitability have made its shares more fashionable again. It is still a daring buy.

MICROGEN

The IT services group gave a pleasing report this week on its third-quarter performance. The company is well managed - Martyn Ratcliffe, former head of Dell Computers in Europe, has been chief executive for six years. Its software is in billing, pricing and payments systems, and one key customer is the financial services sector. This has been on the ropes recently, but Microgen has sold its services on improving efficiency. It says the market "continues to be unpredictable", but is confident it will beat expectations. At about 16 times earnings, it is bang on its peer group average. Buy.

ST IVES

Companies have been cutting costs on their glossy annual reports recently, which spells bad news for St Ives, the printing company that specialises in corporate publishing. It reported a 56 per cent drop in profits this week, in a challenging market that is over-supplied. The slump in advertising has hit its magazine division. Margins on time-sensitive magazines with tight deadlines are the only ones holding up. Costs remain under extreme pressure, and with no sign of an upturn in the underlying market, the shares don't look like they will be so hot off the press. Avoid.

SCOTT TOD

There has been a proliferation of cashpoints in pubs and convenience stores in the past few years. Their viability comes from the convenience factor. If your pub doesn't do cashback, then the £1.50 charge is just about worth paying - something the AIM-listed Scott Tod is learning quickly. There is a clear growth story for the next few years, which is certain to multiply group profits. Buy.

GUS

Bit by bit, GUS is waking up to the fact that conglomerates went out of fashion about the same time as ra-ra skirts. The question is when will it follow suit with Experian, its financial and marketing services business? For now, each of its businesses is firing on all cylinders. GUS was this column's star pick of 2004 - and its shares are up nearly 20 per cent. At 890p, they are not cheap, but there is still upside. Buy.

WHITTARD OF CHELSEA

Teabags from Whittard of Chelsea are not quite Fortnum & Mason, but sales to its loyal customers have been growing. It has been looking to expand in the US, and there is still room for growth in the UK. Profits have been rising steadily, from £1m in 2002 to a forecast £4m in 2005. The shares are not cheap, but the potential growth over the next two years means they should stay on the boil. Hold.

INCEPTA

Like much of the media industry, the marketing and PR group Incepta has been through three years of contraction, as clients slashed expenditure and one-off business dried up. The good times are not exactly back but Incepta's chief executive, Richard Nichols, says companies are increasingly relying on the less glamorous end such as mail-shots. Incepta's fortunes are tied to the ebb and flow of the City and broader economy to a large extent and the recovery is pretty fragile. At 72p, the shares are a hold.

Indian tiger stumbles as mining market goes awry

India and China, the boom economies of the decade, are industrial boiling pots, and miners and smelters have been working at full blast to meet their demand. Metal prices are at record highs. But the toil and grind mining companies are going through in this frenzied period of production was visible this week at Vedanta Resources, the Indian-based metals producer that listed in London in December. It said its production record over the past six months had been patchy. Raw copper output was down 13 per cent while it dug down to the next mining level. Copper and zinc smelters were shut down for maintenance. The production of alumina (unrefined aluminium) dropped following a fire in one of its plants and flooding during monsoons helped to cause a 17 per cent drop in the production of copper cathodes.

At the same time, high energy prices, particularly on coal and coke, are hitting production costs. Vedanta is also losing out in the short term from import tariff cuts by the Indian Government.

But it is spending $2bn (£1.1bn) over the next three years to expand production and lower its cost base. It plans to double its aluminium production by 2007 and increase zinc production by 65 per cent. This will help sustain earnings when metal prices drop. The expansion projects are, according to the company, all on track, although it is still awaiting permission from environmental authorities to start production at its new copper smelter. This is taking longer than anticipated and highlights the significant risk in Vedanta - failure to deliver on its expansion plans, which is a possibility, would hit earnings significantly.

The above is a selection from the daily Investment Column